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American Economic Review
Nashville : American Economic Association
ISSN : 0002-8282

Trade Liberalization and Regional Dynamics


Rafael Dix-Carneiro | Duke University |
Brian K. Kovak | Carnegie Mellon University |

Vol.107 No.10 , pp.2908 ~ 2946



We study the evolution of trade liberalization’s effects on Brazilian local labor markets. Regions facing larger tariff cuts experienced prolonged declines in formal sector employment and earnings relative to other regions. The impact of tariff changes on regional earnings 20 years after liberalization was three times the effect after 10 years. These increasing effects on regional earnings are inconsistent with conventional spatial equilibrium models, which predict declining effects due to spatial arbitrage. We investigate potential mechanisms, finding empirical support for a mechanism involving imperfect interregional labor mobility and dynamics in labor demand, driven by slow capital adjustment and agglomeration economies. This mechanism gradually amplifies the effects of liberalization, explaining the slow adjustment path of regional earnings and quantitatively accounting for the magnitude of the long-run effects.


>> I. Trade Liberalization in Brazil
>> II. Data and Empirical Approach
>> III. Results
>> IV. Mechanisms
>> V. Conclusion


  • Autor, David H. | David Dorn | Gordon H. Hanson (2013) , The China Syndrome: Local Labor Market Effects of Import Competition in the United States , American Economic Review , VOL.103 No.6 , pp.2121 ~ 2168